I would not plan on using the car to drive around Lisbon or Porto, that will be a big pain to constantly find parking, and many of the roads are narrow, steep, and windy. But there are some lots you can park overnight (there was one a block from our hotel in Porto we were going to use if we got to town after Hertz closed), so you can do the math on whether it's worth keeping the car to drive yourself to the airport. I believe the taxes on returning the car to OPO may be meaningful, vs. dropping in the city. I suspect getting rid of the car sooner rather than later will be the better option.
Lisbon, I'd stay in Principe Real/Barrio Alto, Baixa, or Av de la Liberdade. I wouldn't stay up near the Intercontinental / Four Seasons, that area seemed a bit removed.
We stayed at an AMAZING boutique hotel called the Palacio Principe Real.
In Porto, the Intercontinental is well-located but there's been tons of construction of a new metro line right there so it's probably noisy and half the roads are closed off (you can see in Google Street View), not sure how bad it will be next year.